It is a great pleasure to follow Barry Gardiner. Listening to him reminded me how much I used to enjoy his philosophical excursions when he served on the Public Accounts Committee under my chairmanship. They may have been philosophical excursions, but they were always useful and reminded us of what was important. He did that again today with his reference to world ecology as well to the world economy.

That being said, I suspect that this Budget will be judged on a rather simpler basis. When the economic historians look back on it—it will be to them that we will have to look, because I am sure that the economic journalists will give it hell—they will consider a principal, objective aim: whether it gets us out of this recession. It will be as simple as that, and all the complexity of the numbers should not obscure that. Those economic historians will probably look back on what preceded the Budget as a decade of delusion; that is probably the simplest way of putting it. There was self-delusion on the part of the Government in many ways, ranging from the way in which they introduced creative accounting into our national accounts and fell for their own propaganda in so doing, right through to the hubris of believing that they had put an end to boom and bust. All that was self-delusion, and it has lasted a decade.

There is also the self-delusion of the bankers, who created instruments that they told us would minimise risk, but in fact simply concealed it. That led to the maximisation of that risk, which, of course, is what broke the system in the final analysis. There is also the self-delusion of the professions—the accountants and the credit-rating agencies—that failed. It was a criminal failure in my judgment, and I say that not in hyperbolic terms. I mean a literal criminal failure to protect the public from the misrepresentations that were visited on them, both by the public sector—the Government—and the private sector.

I will leave it to colleagues to enumerate the massive overspends, false forecasts, incredible levels of debt, and debt burdens that have been visited on us as a result. I want to focus, briefly, on the consequences of those delusions for the set of policies that were explained to us today, and on the likely effectiveness of those policies.

A few weeks ago in the Chamber we debated the Government's response to the banking crisis and, in particular, one of the delusions that they wanted to maintain in their response. They wanted the public not to recognise the size of the problem early on. Look at the delays that they undertook in responding to Northern Rock and to all the other problems that they had to face. Why did they do that? Because to recognise those problems was to shoulder the burden of responsibility for them.

So the Government took a route that was probably most like the route taken in the 1990s by the Japanese Government who faced a similar sort of problem and colluded with their banks to cover up the size of the problem. Contrast that with what the Swedish Government did, also in the 1990s. The Swedish Government forced into the public domain the size of the problem, forced the banks to recognise the liabilities that they faced, forced the shareholders of the banks to face those liabilities, and then stepped in, cleaned up the mess, sorted out the banking system, and underwrote the depositors. Within three years they had their economy back on track. By contrast, Japan 20 years later still does not have its economy back on track.

I am afraid we are on a Japanese trajectory rather than on a Swedish one. Government action has not been seen to resolve the problem of the banking crisis. That has, as I shall explain, some pretty sizeable implications for their policies today. The IMF stated in its report yesterday:

"Systemic risks remain high and the adverse feedback loop between the financial system and the real economy has yet to be arrested".

That is the problem that the Government face. It is time for them to get a grip on that banking problem, make the banks face the losses, end the tripartite system and replace it with a Bank of England control system.

My right hon. Friend David Maclean, who spoke briefly, made it clear that there has been a major regulatory failure. In responding to his comments about the behaviour of the banks, I would say that we have seen a distinction between large quantity of regulation and a high quality of regulation. The failure has been a quality failure in regulation. We used to have a very good Governor of the Bank of England control system that was subtle and able to respond to delicate signals and unforeseen problems when they came up.

That is the nature of the problem. The most obvious short-run effect is the problem that my right hon. Friend raised—that banks have been in receipt of vast quantities of public money, which has been used to improve their balance sheets and not to improve the prospects of their customers—a point that the hon. Member for Brent, North characterised perfectly when he highlighted the contrasting aims and purposes put upon that money given to them.

That is one consequence, but there is another. There is a confidence effect. The way the Government have approached the banking crisis leaves a massive gap in commercial confidence, which in turn has an impact on the Government's own neo-Keynesian strategy. The House will not be surprised to know that I am not entirely comfortably with neo-Keynesian strategies. I think they are over-rated and pose a major series of problems, but let us for a moment accept the Keynesian analysis. Let us accept what it sets out to do, and see what the banking crisis has done to it.

When Keynes first characterised his policy as a policy of effective demand management, it rested on the idea of the Keynesian multiplier. He was not the first person to talk about it, but he was the first person to popularise the idea. He and a man called Professor Hicks characterised it and demonstrated how it worked. It is very simple. If I spend £1 with you, buying something from you, you will spend a portion of that £1 with somebody else, who will spend a portion of that money with somebody else, and so on, so £1 spent has a ripple throughout the economy. Hicks demonstrated that the algebra was pretty simple. If you spend 90p of the £1 that I spent with you and that works down, every £1 that I spend has a £10 effect in the economy. If you spend 80p of the £1 on average, every £1 that I spend has a £5 effect in the economy. If you spend half, every £1 that I spend has a £2 effect. That is what the algebra demonstrates.

What happens if one destroys confidence in the economy? If one makes people feel that commercial activity is dangerous, which it was not last year, one destroys the multiplier. We understand from the Chancellor today that the Government have injected some £20 billion, but I guess it must now be £22 billion given the further £2 billion spent, into the economy trying to reflate demand. That is about 1.5 per cent. of GDP, but with no multiplier effect, it is completely irrelevant. The economic demand management policy has been crippled by the Government's failure to solve the banking crisis, but the issue of confidence and its effect on the multiplier was why Keynes rested so much on that policy. The point is that even if Keynesian policy had had a chance, the Government have destroyed it.

There are other reasons for concerns with neo-Keynesian policies, however, and the primary reason is that spending all that money has a series of effects on the long-term competitiveness of the economy. The most obvious has been discussed today: the long-term impact on tax and borrowing in the United Kingdom—and £600 billion is a spectacular burden on our future competitive ability. Before I address that issue, however, I shall deal with one that the Treasury Committee Chairman, John McFall, raised earlier.

The right hon. Gentleman attempted to argue—I think he was repeating Sam Brittan—that there was no limit to the amount that the Government could borrow and no issue about raising the money. He said that such money has been borrowed before—in the second world war. Well, what a devil of a comparison to make—that we borrowed that amount of money during the second world war. He missed the point, however, which was made by Mr. Field, when he simply said that many people wanted us to win that war and, as a result, were willing to lend us a lot of money so that we could continue spending money to win it. We have had high borrowings at other times in our history, but, at those times, sterling was a reserve currency and it is not now. There are other reasons why we cannot compare our current situation to our history.

Today, we have a real problem: we might well be on a cliff edge in respect of our ability to raise money before we reach the £600 billion limit. One way in which that cliff edge will come nearer is if there is a further decline in our currency, because that would attack the source of much of our borrowing, which comes from abroad. A combination of poor credit worthiness on the part of the Government, an inability to raise taxes to pay the returns and a decline in the currency could have a serious impact on our continued ability to raise money.

That brings us to the issue of overall public expenditure levels, because what do the Government do when they cannot raise money? Then, they do not choose to cut; they have to cut. I am aware of only one point in modern times—peacetime, anyway—when any Government of any persuasion or party cut public expenditure: it was under the Labour party and Denis Healey, because they had to. The International Monetary Fund told him that he had to. No Government willingly cut public expenditure, but it is entirely possible that the strategy that we are in the middle of will lead a future Government, of whatever party, to have no choice but to cut public expenditure, because they will not be able to raise money either by taxes or by borrowing. That is the potential horror story at the end of this situation. I began by talking about how economic historians will see this Budget, and that is the worst scenario—the tragic, potential outcome.

Although I am not a Keynesian, I am not innately against public expenditure in a downturn. If one goes to America, one will see that much of its infrastructure, from roads to dams, was built cheaply in the 1930s and created an underpinning for that great country's economic success thereafter. If one is going to spend money, a downturn is a good time to do so, whether one is a private or a public citizen. However, we must be very careful about how we spend it, and we must understand what we can and cannot do, and what Governments are good and bad at. Let us be plain: Governments, as we all know, are bad at picking winners; it is not what they do. Throughout history, all Governments who have tried it have failed. At one point in the Chancellor's peroration, I heard him proudly lay out the fact that he was going to invest £750 million in high-tech industry. All I can say is that I will make sure that I do not invest where he puts that money; it is a fair bet that those industries will not succeed.

The Government should pump-prime and encourage investment, if not provide the whole investment, in areas in which large—often monopoly—industries underpin other industries. I say to Treasury Benchers that I rather support their idea of improving the status of our broadband structure; actually, what they plan at the moment is rather unambitious. Just as the roads and railways were an underpinning during the industrial revolution, broadband improvement will be an underpinning for industry in future.